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Profiting From Microloans

No one has done more to inspire microfinance globally than the Nobel laureate Muhammad Yunus, but when he condemns commercial microfinance, I believe that he is making a mistake (“Sacrificing Microcredit for Megaprofits,” Op-Ed, Jan. 15). He takes pride in the industry’s achievement in reaching 100 million poor clients, but does not acknowledge that commercialization is precisely how much of that goal was achieved.

Mr. Yunus rightly says that the lure of profits has, in some cases, attracted players with questionable motivations and with practices that must be condemned. But as with the problems of the American subprime mortgage market, the solution is not to abolish the mortgage business — but to demand that the market be sound, transparent and well regulated.

That’s why more than 1,500 organizations and individuals in more than 100 countries have signed on to the Client Protection Principles of the Smart Campaign. Even more important will be government regulation that requires good practice from all providers.

Microfinance institutions aim to reach the two billion people who lack access to basic financial services. To do that, we need to harness the capital markets, not abandon them.

Michael Schlein
Boston, Jan. 17, 2011

The writer is chief executive of Acción, a nonprofit microfinance organization.